Assessment of Taxpayers voluntary compliance with Taxation: A case of Mekelle City, Tigray, Ethiopia

Improved tax compliance boosts the revenues available for supporting public services without increasing the current tax burden on compliant tax payers. There appears to be a trend in tax compliance policies with initiatives by a number of tax authorities to move towards a more taxpayer focused approach. A number of tax authorities have been moving towards a more sophisticated approach to tax compliance. Traditionally there seems to have been an assumption that tax compliance can be ensured with the help of legal enforcement and penalties. These days this is ceasing to be the case, as the taxpayers are demanding more assistance and fair treatment from the tax authorities. Even there seems to have been a shift in attitudes towards treating the taxpayer less as a passive donor who simply has to be billed for taxes due and more as a customer sometimes requiring particular forms of assistance and support. The voluntary compliance behavior of the taxpayers is determined by various factors and identifying these factors and treating them accordingly should be the central premises of any tax system in order to maintain voluntary compliance at satisfactory levels. This study was meant to assess taxpayers’ voluntary compliance with taxation in Mekelle city. Based on this fact, both primary and secondary data are used. Descriptive statistical tools and Reliability test, Factor analysis, correlation and multiple regressions are used in analyzing the data collected. According to the study, factors such as equity or fairness, organizational strength of tax authority, awareness level of tax payers, social factors, cultural factors and tax payers’ attitude towards the government were found to be the determinant factors affecting taxpayers’ voluntary compliance. Finally, based on the findings possible recommendations were given. These include, maintaining tax fairness and equity, building capacity of the tax authority, conducting extensive awareness creation programs, and providing social services to the general public.